By Alisa Sainoski

It is no secret that the Australian Taxation Office (‘ATO’) has declared ride-sourcing drivers such as Uber and Ola are to be treated as taxi drivers under Australian Tax Law.  In 2017 the courts found in favour of the Tax Commissioner and his definition of the word ‘taxi’ to have it’s “ordinary” meaning, that is:  “a vehicle available for hire by the public and which transports a passenger at his or her direction for the payment of a fare that will often, but not always, be calculated by reference to a taximeter”.  Because of this, drivers for Uber, Ola and other ride-sourcing operators are treated as taxi drivers and as such, they are taxed as taxi drivers.  Ride-sourcing drivers must be registered for and pay goods and services (‘GST’) for every dollar they make.

As a GST- registered business owner, 1/11th of the gross income (less expenses) is to be paid to the ATO as GST.  Further, because rider-share drivers are required to be registered for GST they also need to have an Australian Business Number (‘ABN’), lodge business activity statements (‘BAS’) monthly or quarterly and will need to know how to issue a tax invoice.

With the transition from using the original taxi system to an online system the world has seen it as a wakeup call to use the ride-sourcing drivers instead of the traditional taxi drivers.  This would make sense as before these ride-sourcing drivers the taxi system was the only thing available other than luxury hire car chauffeurs.

Uber is a cheaper and more affordable way of travel and thus has become extremely popular.  It is inevitable that as a result of advances in technology, evolution will occur in many industries which in-turn can result in many different problems which need to be solved.

One such area which has been resolved after two years of study and uncertainty is the potential Fringe Benefits Tax (‘FBT’) implications of using Uber and other ride-sourcing drivers rather than a traditional taxi.  Taxi fares are not currently subject to FBT however, the ATO have determined ride-share fares are not to be considered in the same way and accordingly, FBT will apply.  As a result, businesses are urged to consider covering only bona-fide taxi travel and deny the reimbursement of Uber fares in order to avoid an additional FBT liability.

As outlined above, whilst GST is required to be paid on income generated from ride-sourcing activities, input credits can also be claimed on the expenses incurred to earn that income.  It is important to be aware of which expenses actually contain a GST component.  For example, the Uber commission fee has no such GST component.  In addition, the commission formula varies with each different ride-sourcing driver’s fee.  Therefore this means your GST credit will not be reduced by the commission fee.

In addition, claims can only be made where the expenses were for a creditable purpose.  For example, if you use your car 40% for Uber and 60% for private use, this would mean you can only claim a GST credit of 40% from the GST components such as petrol.  To follow this example, if petrol expenditure of $110 is incurred, the GST component would be.  If the vehicle is used 40% of the time to drive for Uber, then only 40% of $10 can be claimed i.e. $4.

Typical claimable deductions would include:

Expenses you may incur in the business but may not be deductible:

Please feel free to contact us on any advice and tax preparing we can prepare for you in relation to ride-source businesses.

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